UK Invoice Factoring Services

Invoice Factoring Services In UK

Explanation of Invoice
Factoring

Invoice Finance or Invoice factoring is a service that provides
companies with a way to release
cash into the business by selling the sales invoices to a
third party or factoring company, while at the same time reducing
the administrative burden or credit collection. The factoring
facility can be used where your business
sells to other businesses and so isn't suitable for
businesses that sell to the public. The services provided by
a factoring company include permitting you to draw down the money
owed to the business from customer invoices. Invoice
discounting is a similar service to invoice finance but with
invoice discounting a business keeps control of sales ledger
management.

Invoice factoring services are provided in two different
formats. The first is recourse
factoring where a company remains responsible for their
customer bad debts. So where your customers fail to pay for
the services they've had your business has to repay any monies
received from the factoring company. The second is Non-Recourse factoring. Here the
bad-debt risk is taken on by the factor. Non-recourse
factoring tends to be a more expensive service as the risks to the
factor are deemed higher.

UK Invoice Factoring
Companies

Many invoice factoring companies are part of retail banks
however many independent finance businesses provide factoring
services. Barclays Bank, HSBC, Lloyds TSB and Royal Bank Of
Scotland are just a few of the banks offering factoring services in
the UK. The independent factoring specialists can be both national
or regional and they include companies such as Bibby Financial
Services, GE Commercial Finance, and Hitachi Capital.

If your business bank provided a factoring solution that could
be a good place to start however it doesn't mean that you should
use their services. The services provided by invoice
factoring companies can vary significantly and many specialise in
certain industry sectors or types of business. All factoring
companies have varying terms and conditions of contract. The
best way to make a decision about which factor would be best suited
to your company is to make contract with a few companies to
understand what they offer and to get comparative quotes etc.

UK invoice factoring fees are built up using a number of
different variables which may or may not include discount fees,
charges for credit control and/or credit protection. The so
called discounting fee is the fees charged on the amount loaned,
and is often based on a daily rate and charged monthly. Very
similar to the way a bank would charge interest on loans.
Interest rates for factoring vary between companies but can
typically be 1-3% above the base rate. Generally credit
management fees vary between 1-10% and they're to cover the costs
of administering your factoring account. Credit protection
costs are strongly influenced by the factoring companies view of
the strength of your customer base - how financially robust your
customers are i.e. likely to pay. These fees are relevant
only in non-recourse factoring arrangements..

How To Find A UK Factoring
Company

The first port of call should be ABFA (Asset Based
Finance Association) website. ABFA is the recognised
trade association for the industry in both UK and Ireland and their
website provides full details of all their members together with
advice on choosing a company. Once you have a list of
potential factoring companies you should make contact with them to
discuss your requirements and to get comparative quotes.

Buyers guides

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